A.

OVERVIEW
Startup India Scheme

The Startup India campaign is a welcome initiative to boost entrepreneurship in India. It is an

initiative by the government of India aimed at encouraging the development and innovation of
products and services and the creation of employment opportunities across the country. It
promotes bank financing, simplifies the incorporation process and grants exemptions to startups.
One of the goals of the scheme has been simplifying how to register a startup in India by reducing
regulatory burdens and allowing them to focus on their core business while keeping compliance
costs low and also providing multiple benefits, aside from the massive networking opportunities
provided by the bi-annual startup festivals held by the Government of India both domestically and
internationally.

Income Tax Benefits

Startups are now given an income tax exemption for a period of three years from the date of
incorporation provided they are certified as such by the Inter-Ministerial Board of Certification. Also,
upon obtaining recognition from the DPIIT (Department for Promotion of Industry and Internal
Trade), and if the aggregate amount of paid-up share capital and share premium of the startup after
the proposed issuing of shares, if any, does not exceed INR 25 Crore, the startup will also be exempt
from capital gains tax under Section 56 of the Income-tax Act,1961-2014.

Financial Benefits

Startups are given a rebate on intellectual property rights (IPR) costs of 80% on patents and 50% on
trademarks and are actively assisted by government-provided facilitators who aid with protecting
and commercializing the IPRs. The examination and disposal of the IPR applications are also fast-
tracked. The government will also pay the fees of the facilitators.

Registration Benefits

Startup registration in India is still extremely complex, with incorporation and registration being
considered more difficult than the actual running of a business due to the arduousness of the
requirements. Under the scheme, the Startup India Hub, a portal to create networking opportunities
and assistance for startups, has been created with a problem-solving window being provided by the
government under the scheme.

Funding Benefits

Certain states provide seed funding to startups certified under the scheme. To know about your
state and the requirements in place, click here.

Regulatory Benefits

Under the Startup India Scheme, startups are allowed to self-certify compliance for six labour laws
and three environmental laws through a simple online procedure. For labour laws, no inspections
will be conducted for a period of 5 years unless there is a credible and verifiable complaint of
violation, filed in writing, and approved by an official who is at least one level senior to the
inspecting officer. In the case of environmental laws, startups that fall under the ‘white category’ (as
defined by the Central Pollution Control Board) would be able to self-certify compliance, and only
random checks would be carried out in such cases

Public Procurement Benefits

Once your startup is certified by the Inter-Ministerial Board of Certification and a DIPP (Department
of Industrial Policy and Promotion) number has been issued to you, you can get listed as a seller on
the Government of India’s e-procurement portal – Government e-Marketplace – and have the inside
track on all Government of India Ministries/Departments/Public Sector undertakings subject to your
ability to meet quality and technical requirements. Certified startups will also be entitled to
exemptions on the earnest money deposit in your bid as well as in terms of the requirements
regarding prior turnover and experience.

Faster Exit Benefits

The government has initiated provisions making winding down operations easier by appointing an
insolvency professional to fast-track the closure of operations and facilitate the sale of goods as well
as paying creditors, all while recognising limited liability. Startups with a simple debt structure or
those meeting the criteria outlined under this scheme will be able to achieve a complete exit within
90 days.

B. REQUIREMENTS

Checklist under the Startup India Scheme

An organisation will be eligible under the scheme if

 It is incorporated as a private limited company or registered as a partnership firm or a

limited liability partnership in India
 It has been less than ten years from the date of its incorporation/registration
 Its turnover for any of the financial years since incorporation/registration has not exceeded
INR 100 Crores
 It should possess a DIPP number
 It is funded by an incubation fund, angel fund, or private equity fund that is registered with
the Securities and Exchange Board of India (SEBI)
 It has obtained a patron guarantee from the Indian Patent and Trademark Office
 It has a recommendation letter from an incubator
 Capital gain is exempt from income tax
 It is working towards the innovation, development, or improvement of products or
processes or services, or if it is a scalable business model with a high potential for
employment generation or wealth creation
 C. PROCESS
Process to Register under the Scheme

The most important step is to register the company as one of only three possible types of entities:

1. Private Limited Company, registered under the Ministry of Corporate Affairs and regulated
by the Companies Act, 2013 and the Companies Incorporation Rules, 2014.
2. Partnership Firm, registered under the partnership firm act, is a structure where the
founders are subject to a partnership deed with the conditions outlined and registered with
the registrar of firms.
3. Limited Liability Partnership (LLP) registered under the Limited Liability Partnership Act,
2008 is a structure wherein a partnership firm takes on the characteristics of a private
limited company in terms of facilities such as limited liability and transferability.

Once registered, goto at startup recognition page of Government Startup India Portal and follow the
steps outlined to be recognised by the DPIIT as a startup under the Startup India Scheme, including
uploading whatever documents they might request and providing the information requested, such
as registration/incorporation number, representatives, directors/partners, address, date of
incorporation, and so on.